Prentice v Cummins (No 7)
[2003] FCA 1162
•24 OCTOBER 2003
FEDERAL COURT OF AUSTRALIA
Prentice v Cummins (No 7) [2003] FCA 1162
PRACTICE AND PROCEDURE – claim for interest pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth) – appropriate rate of interest to apply
COSTS – apportionment of costs liability between parties
Bankruptcy Act 1966 (Cth), s 121
Federal Court of Australia Act 1976 (Cth)
Federal Court Rules (Cth), O 35 r 8
Supreme Court Rules 1970 (NSW), Sh JNamol Pty Ltd v AW Baulderstone Pty Ltd (No 2) (1993) 47 FCR 388, cited.
Forster v Farquhar [1893] 1 QB 564, cited.MAXWELL WILLIAM PRENTICE & ANOR (together the Trustees of the property of John Daniel Cummins, a Bankrupt) v MARY ELIZABETH CUMMINS & ORS
N 7481 of 2001SACKVILLE J
SYDNEY
24 OCTOBER 2003
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
N 7481 OF 2001
BETWEEN:
MAXWELL WILLIAM PRENTICE
FIRST APPLICANTMARK JULIAN ROBINSON
SECOND APPLICANT
(together the Trustees of the Property of John Daniel Cummins, a Bankrupt)AND:
MARY ELIZABETH CUMMINS
SECOND RESPONDENTAYMCOPIC PTY LIMITED
THIRD RESPONDENTHOSPITALITY HIRE PTY LIMITED
FOURTH RESPONDENTJUDGE:
SACKVILLE J
DATE OF ORDER:
24 OCTOBER 2003
WHERE MADE:
SYDNEY
THE COURT DECLARES THAT:
1.The transfer made by the Bankrupt (John Daniel Cummins) of his legal and beneficial interest as joint tenant in the property at 77 Alexander Street Hunters Hill (the “Hunters Hill Property”) to the second respondent on or about 26 August 1987 is void as against the applicants pursuant to s 121 of the Bankruptcy Act 1966 (Cth).
2.The transfer of the shares in Counsel’s Chambers Ltd (the “Shares”) made by the Bankrupt to the third respondent on or about 26 August 1987 is void as against the applicants pursuant to s 121 of the Bankruptcy Act 1966 (Cth).
THE COURT ORDERS THAT:
1.The second respondent pay to the applicants the net proceeds of sale of the Hunters Hill Property invested by Russell & Company, solicitors, as trustees for M E Cummins and Maxwell William Prentice in his capacity as trustee to the bankrupt estate of John Daniel Cummins, in the sum of $1,064,417.82, together with all interest accrued thereon.
2.The third respondent pay to the applicants the net proceeds of sale of 4,000 shares in Counsels Chambers Ltd, invested by Russell & Company, solicitors, as trustees for M E Cummins and Maxwell William Prentice in his capacity as trustee to the bankrupt estate of John Daniel Cummins, in the sum of $405,882.73, together with all interest accrued thereon.
3.The third respondent pay to the applicants the sum of $120,010.00, together with interest thereon at the rate of 9 per cent per annum from 2 November 2001 until the date of judgment.
4.The second and third respondents pay 60 per cent of the applicants’ costs of the proceedings.
5.The applicants file within seven days a further amended application and a further amended statement of claim in the form of the annexures to the draft notice of motion accompanying the applicants’ submission in relation to costs and interest.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
N 7481 OF 2001
BETWEEN:
MAXWELL WILLIAM PRENTICE
FIRST APPLICANTMARK JULIAN ROBINSON
SECOND APPLICANT
(together the Trustees of the Property of John Daniel Cummins, a Bankrupt)AND:
MARY ELIZABETH CUMMINS
SECOND RESPONDENTAYMCOPIC PTY LIMITED
THIRD RESPONDENTHOSPITALITY HIRE PTY LIMITED
FOURTH RESPONDENT
JUDGE:
SACKVILLE J
DATE:
24 OCTOBER 2003
PLACE:
SYDNEY
REASONS FOR JUDGMENT
In the judgment of 24 September 2003, I directed the Trustees to bring in short minutes of order to give effect to the reasons for judgment and to file any application to amend the pleadings within the same time. I provided also for submissions on costs and any outstanding issues. These have now been received.
Proposed Amendments
The Trustees seek to amend the application to claim interest. The fresh orders that are sought are as follows (adopting the numbering used by the Trustees):
“(2)An order that Mrs Cummins as the sole director of Aymcopic and/or Aymcopic pay the net sale proceeds of the Property invested on deposit by Russell & Company as trustee for ME Cummins and Maxwell William Prentice in his capacity as trustee to the bankrupt estate of John Daniel Cummins in the amount of $1,064,417.82 (‘the Property Proceeds’) to the Trustee, together with all interest accrued thereon;
(3)An order that Mrs Cummins pay the Trustee interest on the Property Proceeds pursuant to section 51A of the Federal Court Act 1976 (‘the Act’) at a rate that is the difference between 10.5% and the rate earned by the Property Proceeds whilst on deposit from 2 July 2002 to the date of judgment herein;
(4)An order that Mrs Cummins pay the Trustee interest on the Property Proceeds from the date of judgment at the rate prescribed by order 35, rule 8 of the Federal Court Rules from time to time in force;
…
(6)An order that Mrs Cummins as the sole director of Aymcopic and/or Aymcopic pay the net sale proceeds of the Remaining Shares invested on deposit by Russell & Company as trustee for ME Cummins and Maxwell William Prentice in his capacity as trustee to the bankrupt estate of John Daniel Cummins in the amount of $405,882.73 (‘the Remaining Share Proceeds’) to the Trustee, together with all interest accrued thereon;
(7)An order that Aymcopic pay the Trustee interest on the Remaining Share Proceeds pursuant to Section 51A of the Act at a rate that is the difference between 10.5% and the rate earned by the Share Proceeds whilst on deposit from 4 September 2002 to the date of judgment herein;
(8)An order that Aymcopic pay the Trustee interest on the Share Proceeds from the date of judgment at the rate prescribed by order 35, rule 8 of the Federal Court Rules from time to time in force;
(9)An order that Mrs Cummins as sole director of Aymcopic and/or Aymcopic deliver up and/or account for the Share Monies in the sum of $120,010 to the Trustee, together with interest at the rate 10.5% from 2 November 2001 to the date of judgment herein pursuant to section 51A of the Act;
(10)An order that judgment be entered against Aymcopic in the amount of $120,010 together with interest from the date of judgment at the rate prescribed by order 35, rule 8 of the Federal Court Rules from time to time in force.”
The expression “Share Monies” in par 9 is defined in the second further amended statement of claim to mean the sum of $177,154 which was realised by the sale of 2000 Shares (that is, the shares in Counsel’s Chambers Ltd) in December 1997. The expression “Remaining Shares” refers to the 4,000 Shares still vested in Aymcopic, which were also sold by agreement between the parties.
The respondents submit that there had been a claim for interest from the outset and that therefore no amendment to the pleadings is necessary. In fact, the Trustees appear to have made no specific claim for interest prior to their application to amend. In my opinion, there is no prejudice to the respondents to allow the Trustees to amend as they have proposed. Accordingly, I grant leave for the Trustees to file a further amended application and a further amended statement of claim in the form of the annexures to the draft notice of motion accompanying the Trustees’ submissions in relation to costs and interest. I direct that the amended pleadings should be filed within seven days.
Interest
The Trustees claim interest pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth). Section 51A(1) provides as follows:
“In any proceedings for the recovery of any money (including any debt or damages or the value of any goods) in respect of a cause of action that arises after the commencement of this section, the Court or a Judge shall, upon application, unless good cause is shown to the contrary, either:
(a)order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered; or
(b)without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest.”
The Trustees contend that the appropriate rate is 10.5 per cent per annum, being the interest rate applicable to a judgment debt pursuant to Federal Court Rules (“FCR”), O 35 r 8. The Trustees state that they would be content if interest ran from the date of filing of the statement of claim, that is 2 November 2001. The Trustees acknowledge that the Hunters Hill Property was sold by agreement between the parties and the proceeds of sale deposited in a trust account, yielding approximately 4.8 per cent per annum. However, they submit that Mrs Cummins should pay the differential between interest calculated at 4.8 per cent per annum and at 10.5 per cent per annum. They take the same approach to interest on the proceeds of sale of the Remaining Shares.
The respondents rely on the following (which is said to be common ground):
(b)at the date of commencement of the proceedings, Mrs Cummins was registered as the proprietor of the Hunters Hill Property;
(c)she decided to sell it for reasons unconnected with the litigation;
(d)she was not ordered to sell it, nor did she sell it at the request of the applicants;
(e)by a Notice of Motion filed 30 November 2001, the Trustees applied for an injunction to restrain any dealings with one-half of the net proceeds of any sale, other than by payment into Court (where no interest would have been earned);
(f)that application was compromised on 11 December 2001 by an agreement that one-half of the net proceeds of the sale would be held on trust in an interest bearing account to abide the outcome of the proceedings;
(g)that has been done; and
(h)Mrs Cummins has, by reason of the applicants’ application, not had access to or use of any of the disputed proceeds of sale of the property.
In my view, the appropriate course is for the Trustees to receive interest on the proceeds of sale of the Hunters Hill Property, but limited to the interest actually earned in consequence of the arrangement made on 11 December 2001. It is one thing for Mrs Cummins to be required to pay interest at the higher rate reflected in FCR O 35 r 8 (or at a similar rate), if she had remained in possession of the Hunters Hill Property pending the resolution of the proceedings. It is another thing to require interest to be paid at the higher rate when the Hunters Hill Property has been sold and the proceeds, so far as they are the subject of dispute, have been invested by agreement in an interest bearing deposit pending the outcome. In my opinion, it would impose an unfair burden on Mrs Cummins to require her to pay a higher rate of interest.
There is nothing to show that Mrs Cummins had the benefit of the moneys derived from the sale of the Hunters Hill Property before the proceeds of sale were invested in accordance with the parties’ agreement. Having regard to that fact, and the short period between the institution of proceedings (from which date the Trustees claimed interest) and the date of the proceeds of sale were invested, no order should be made in respect of interest during that period.
I accept the respondents’ submission that the same approach should be taken to the claim for interest on the net sale proceeds of the Remaining Shares.
There is no good reason Aymcopic should not be ordered to pay interest on the sum of $120,010 (being the amount of $177,154 received by Aymcopic on the sale of 2000 of the Shares on 12 December 1997, less $57,144 distributed by Aymcopic to a beneficiary of the Trust). The Trustees seek interest from 2 November 2001 to the date of judgment. I think that interest should be paid at the rate of 9 per cent per annum, as prescribed by Sch J to the Supreme Court Rules 1970 (NSW): see Namol Pty Ltd v AW Baulderstone Pty Ltd (No 2) (1993) 47 FCR 388, at 389, per Davies J.
Costs
The Trustees say that an order for costs should be made in their favour, since they succeeded in the objective of the litigation, namely to retrieve assets that should have vested in the Bankrupt’s estate. They contend that there should be no reduction in respect of the issues on which they failed, bearing in mind their duty to act in the best interests of creditors of the Bankrupt. In the alternative, so they argue, any abatement of the respondents’ liability to pay costs should be minimal, because little time was taken on the issues on which the Trustees failed.
The respondents say that costs should be assessed by reference to the separate issues in the proceedings, in respect of some of which they succeeded. In particular, they point out that they succeeded on the Trustees’ claims relating to the share in Hospitality Hire and for the repayment of moneys loaned to Mrs Cummins. Indeed, the respondents contend that the Trustees should pay the respondents’ costs of the issues in which they (the respondents) succeeded, on an indemnity basis. They also say that a special order is warranted because the Trustees discovered an excessive volume of documentation, thus increasing the costs of the proceedings.
I think that because there were a number of “separate heads of controversy” in the case (Forster v Farquhar [1893] 1 QB 564, at 570, per Bowen LJ), it is appropriate to make some allowance for the issues on which the respondents succeeded. I am not persuaded, however, that I should attempt a precise dissection of the costs attributable to each issue (as the respondents suggest). In my opinion, there is no basis for requiring the Trustees to pay the costs of any issues in the proceedings on an indemnity basis. Nor am I persuaded that the Trustees’ approach to discovery or the tender of documents was such as to require an adjustment to the costs orders that otherwise would be appropriate.
In my view, a broad approach to costs should be taken. The fact that the respondents succeeded on some issues would be adequately accommodated by an order that the respondents pay 60 per cent of the Trustees’ costs of the proceedings. An order to this effect should be made. However, the orders should be confined to the second and third respondents as the Trustees obtained no relief against the fourth respondent.
Declarations
The respondents submit that since the Hunters Hill Property and the Shares have been sold, there is no utility in granting declaratory relief. They also raise the possibility, although they accept it is “unlikely”, that the title of the purchasers of the Hunters Hill Property and the Shares might be impeached if declaratory relief were to be granted.
The grant of relief to the Trustees in respect of the proceeds of sale of the Hunters Hill Property and the Shares is dependent on a finding that the transfers by the Bankrupt were void against the Trustees pursuant to s 121 of the Bankruptcy Act 1966 (Cth). A declaration to that effect cannot be said to be of no utility. In the absence of more detailed or cogent submissions by the respondents, I am unable to see how declaratory relief could impeach the title of the purchasers of the Hunters Hill Property or the Shares. Accordingly, declaratory relief is appropriate.
Declarations and Orders
I propose to make the following declarations:
1.The transfer made by the Bankrupt (John Daniel Cummins) of his legal and beneficial interest as joint tenant in the property at 77 Alexander Street Hunters Hill (the “Hunters Hill Property”) to the second respondent on or about 26 August 1987 is void as against the applicants pursuant to s 121 of the Bankruptcy Act 1966 (Cth).
2.The transfer of the shares in Counsel’s Chambers Ltd (the “Shares”) made by the Bankrupt to the third respondent on or about 26 August 1987 is void as against the applicants pursuant to s 121 of the Bankruptcy Act 1966 (Cth).
I propose to make the following orders:
1.The second respondent pay to the applicants the net proceeds of sale of the Hunters Hill Property invested by Russell & Company, solicitors, as trustees for M E Cummins and Maxwell William Prentice in his capacity as trustee to the bankrupt estate of John Daniel Cummins, in the sum of $1,064,417.82, together with all interest accrued thereon.
2.The third respondent pay to the applicants the net proceeds of sale of 4,000 shares in Counsels Chambers Ltd, invested by Russell & Company, solicitors, as trustees for M E Cummins and Maxwell William Prentice in his capacity as trustee to the bankrupt estate of John Daniel Cummins, in the sum of $405,882.73, together with all interest accrued thereon.
3.The third respondent pay to the applicants the sum of $120,010.00, together with interest thereon at the rate of 9 per cent per annum from 2 November 2001 until the date of judgment.
4.The second and third respondents pay 60 per cent of the applicants’ costs of the proceedings.
I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice SACKVILLE. Associate:
Dated: 24 October 2003
Counsel for the Applicants: Mr B Coles QC with Mr C Newlinds Solicitor for the Applicants: Clayton Utz Counsel for the 2nd to 4th Respondents: Mr P L G Brereton SC with Mr M Ashhurst Solicitors for the 2nd to 4th Respondent:
Russell & Company
Date of Hearing:
Date of Final Submissions on Costs and Interest
17-19 September 2002; 8 September 2003
21 October 2003
Date of Judgment: 24 October 2003
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